Y Combinator Partner Explains How To Ask For Millions Of Dollars From A Stranger In 30 Seconds

Follow these 3 simple steps, and you might get the next $1 million funding.
REUTERS/Jo Yong-Hak
Michael Seibel, a partner at Y Combinator, has a pretty good track record when it comes to running startups.

He's the cofounder of Justin.tv, the online broadcasting site that changed its name to Twitch and sold to Amazon for $970 million this year. He was also the cofounder and CEO of Socialcam, a video-sharing app that was acquired by Autodesk for $60 million in 2012.

Seibel gave a presentation at Stanford last week as part of Y Combinator President Sam Altman's class, "How to Start a Startup." He went over a few things on how to pitch investors, but what really stood out was his approach to the 30-second pitch.

"You need to be armed with this constantly ... It's magic," Seibel says.

Seibel says every entrepreneur should have a strong 30-second pitch ready in three simple sentences:

- What your company does: You have to explain what your company does in one simple sentence. Assume the investors know absolutely "nothing about anything." Apply the "Mom test," where you have to tell your mom what you do in one, super simple sentence. "Everyone I meet for the first time screws this up … use simple language, it's very important." Seibel says.

- How big is your market: Do some research and pick the industry your product is in — and come up with a dollar figure amount for the size of the market. "Investors like to hear that you're in a multi-billion dollar market … these are simple numbers to look up on Google. Don't skip this step," he says.

- How much traction do you have: Come up with a sentence that explains your monthly growth rate in terms of sales and number of users. If you haven't launched your product and don't have those figures, at least show how quickly you're planning to move from your beta to official product. "Convince the investor that you guys are moving fast and that this isn't some long slog…you're thinking about it like a startup where you can move fast and make mistakes," he says.

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With these three sentences, Seibel says every entrepreneur should be able to quickly explain what the company does, and start a conversation with investors. Once you're done with this step, you then move on to the 2-minute pitch, which requires more insight like competitive advantage, business model, team experience, and fundraising terms.

But what's next after the 2-minute pitch? Nothing. Seibel says 10- and 30-minute pitches or hour pitches are "all garbage," because you can get everything nailed down in just 2 minutes.

"One thing I like to tell founders is the more you talk, the more you have an opportunity to say something that people don't like. Talk less and it will probably be better," he says.